Shriram Finance shares nearly double in a year. Will the stock sustain its strong momentum?

Shares of Shriram Finance have delivered a strong rally over the past year, with the stock nearly doubling in value and emerging as a key outperformer in the non-banking financial services space.

Over the last 12 months, the stock has gained around 90.5%. The rally has remained broad-based across time frames, with gains of 59.3% over six months and 39.5% over three months, while shorter-term performance shows a 5.1% rise over the past month and a 3.2% gain over two weeks.

The stock’s strong performance has been driven by a combination of improving fundamentals, strong loan growth across segments, and a major strategic investment deal with Japan’s MUFG Bank.


Recently, shareholders approved proposals linked to MUFG’s acquisition of a 20% stake in Shriram Finance for $4.4 billion, marking one of the largest cross-border investments in India’s financial services sector. The proposals, including share issuance and board representation for MUFG, received overwhelming shareholder support, reinforcing confidence in the strategic partnership.

On a fundamental note, domestic brokerage firm Prabhudas Lilladher expects the firm’s assets under management (AUM) to grow at a compound annual growth rate of about 18% over FY25-28, driven by strong traction in commercial vehicle, passenger vehicle, MSME, and gold loan segments.

It also highlighted that the company reported a 14.6% year-on-year rise in AUM in Q3FY26, supported by growth in vehicle finance and non-vehicle finance portfolios.

Prabhudas Lilladher further noted that net interest margin (NIM) improved to 8.6% due to lower cost of funds, while asset quality remained broadly stable with improvements in Stage 2 categories.

The brokerage expects credit costs to improve by around 20 basis points by FY28 and anticipates further margin expansion, supported by a favourable product mix and controlled asset quality trends.

What should investors do and will this rally sustain?

From a technical perspective, analysts have flagged near-term risks of consolidation after the sharp rally.

Jigar S Patel, Senior Manager, Technical Research Analyst at Anand Rathi Shares and Stock Brokers, said that Shriram Finance is currently in a strong bullish trend, trading above key exponential moving averages, which indicates sustained buying interest.

However, he cautioned that momentum indicators suggest the stock is extremely overbought at current levels, raising the possibility of near-term consolidation or profit booking.

Patel advised investors to consider booking partial profits at higher levels and avoid initiating fresh long positions until a decisive breakout above Rs 1,030 on a daily closing basis is seen, which could attract fresh buying interest.

He identified Rs 965 as a key support zone on the downside.

Analysts at Prabhudas Lilladher also broadly remain constructive on the company’s medium- to long-term growth prospects, citing strong AUM growth, improving margins, stable asset quality, and strategic capital infusion from MUFG.

However, they suggest investors closely monitor technical levels and business performance updates to assess whether the rally can sustain beyond the recent highs.

From a fundamental perspective, the brokerage firm has maintained a ‘Buy’ rating on Shriram Finance with a target price of Rs 1,175.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)